Annual Breakdown
401(k) Tax Impact Calculator
A 401(k) contribution does two things at once: it lowers the paycheck you take home today, and — if it's traditional — it lowers your taxable income, which lowers your tax bill. This calculator separates those two effects so you can see the real, after-tax cost of saving for retirement.
How the Tax Impact Is Calculated
The math has three separate parts: your paycheck reduction, your tax savings, and your employer match. Here's how each is worked out.
Your Paycheck Reduction
Your contribution percentage is applied to your gross pay each period. If you earn $75,000/year, paid bi-weekly ($2,884.62/paycheck), and contribute 6%, that's $173.08 deducted from each paycheck before you ever see it.
Your Federal Tax Savings (Traditional Only)
A traditional contribution reduces your taxable income dollar-for-dollar. Your actual savings equal your total annual contribution multiplied by your marginal federal tax bracket — the rate on your last dollar of income, not your average rate. In the 22% bracket, a $4,500 annual contribution saves roughly $990 in federal tax.
Your Real Cost Per Paycheck
Subtract your per-paycheck tax savings from your per-paycheck contribution to see what actually leaves your pocket. A $173.08 contribution taxed back at 22% only costs you about $135 in real, spendable take-home pay — the other $38 was never yours to keep; it would have gone to the IRS regardless.
Employer Match — Free Money on Top
Your employer's match doesn't reduce your paycheck and doesn't count toward your personal $24,500 limit. It's calculated on top of your contribution based on your plan's formula (e.g., "50% up to 6%") and goes straight into your account, typically as pre-tax money regardless of whether your own contributions are Roth.
2026 IRS Contribution Limits
The IRS raised 401(k) limits for 2026. Here's the full breakdown, current as of the November 2025 IRS announcement.
| Category | 2025 Limit | 2026 Limit |
|---|---|---|
| Standard elective deferral | $23,500 | $24,500 |
| Catch-up (age 50–59, 64+) | $7,500 | $8,000 |
| Total with standard catch-up | $31,000 | $32,500 |
| Super catch-up (age 60–63) | $11,250 | $11,250 |
| Total with super catch-up | $34,750 | $35,750 |
| Combined employee + employer cap | $70,000 | $72,000 |
| Annual compensation cap | $350,000 | $360,000 |
The New Mandatory Roth Catch-Up Rule
This is the single biggest 401(k) change for 2026, and it catches a lot of higher-earning savers off guard.
What Changed
Under the SECURE 2.0 Act, starting January 1, 2026, any employee age 50 or older whose FICA wages (Box 3 of their W-2) from their employer exceeded $150,000 in 2025 must make all catch-up contributions on a Roth (after-tax) basis. Pre-tax catch-up contributions are no longer allowed for this group.
Who It Affects
Only the catch-up portion — the amount above the standard $24,500 limit. Your first $24,500 can still be traditional or Roth, your choice. It's only the extra $8,000 (or $11,250 for ages 60–63) that must be Roth if you cross the $150,000 threshold.
What Happens If You Don't Choose
If you're subject to the rule and don't proactively elect Roth, most plans will automatically redirect your catch-up contributions to Roth under an IRS-approved "deemed election" — you don't need to do anything, but it does mean less of an upfront tax deduction than you may be expecting.
Plans Without a Roth Option
If your employer's 401(k) doesn't offer a Roth feature at all, affected employees simply won't be able to make catch-up contributions until the plan is amended to add one. Employers have until December 31, 2026 to update plan documents.
Traditional vs. Roth 401(k)
Both share the same 2026 contribution limits — the difference is entirely about when you pay tax.
Traditional (Pre-Tax)
Contributions reduce your taxable income this year. Withdrawals in retirement are taxed as ordinary income. Best if you expect to be in a lower tax bracket in retirement than you are now.
Roth (After-Tax)
Contributions are made with already-taxed dollars — no deduction today. Qualified withdrawals in retirement, including all growth, are completely tax-free. Best if you expect to be in the same or a higher bracket later.
Many savers split contributions between both to hedge against not knowing what tax rates will look like decades from now — a strategy sometimes called "tax diversification."
Getting Your Full Employer Match
An employer match is one of the only guaranteed, instant returns available in personal finance — leaving it on the table means giving up free compensation.
Common Match Formulas
Simple match: A flat percentage, like "100% up to 3%" — your employer matches every dollar you contribute, dollar-for-dollar, until you hit 3% of salary.
Tiered match: A layered formula, like "100% on the first 3%, then 50% on the next 2%" — common under Safe Harbor plans, and slightly more generous at lower contribution levels.
Vesting
Your own contributions are always 100% yours. Employer match dollars are often subject to a vesting schedule — cliff vesting (0% ownership until a set number of years, then 100% at once) or graded vesting (ownership increases a set percentage each year). Leaving a job before you're fully vested means forfeiting the unvested portion.
Watch Per-Paycheck Contribution Timing
Some plans calculate match per pay period, not per year. If you front-load contributions early in the year and hit the $24,500 limit by August, your employer's payroll match may stop with you — meaning you could miss months of match on a plan that doesn't "true up" at year-end. Check with HR on whether your plan offers a true-up provision before front-loading.